4 RBC US Equity Top Pick Stocks That Also Pay Solid Dividends

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We have seen it the past two days, and as the first-quarter earnings parade wraps up, we are very likely to see it again. Volatility is creeping back into the markets, and the “Sell in May and go away” mantra is starting to quietly be chanted across Wall Street. The problem with going away is there is no place to go. Cash deposits pay nothing, and with inflation and taxes it becomes a negative return instrument.

Stocks remain the place to be, and more conservative companies that pay dividends are probably the best arena for investors to consider. We recently screened the RBC Capital Markets U.S. Equity Top Picks list for companies that not only have solid upside potential, but also pay good dividends. We found four that look good for growth and income accounts.

Marathon Petroleum

This top refiner rolled over after first-quarter earnings and may be offering an outstanding entry point. Marathon Petroleum Corp. (NYSE: MPC) has a diversified business that operates through Refining & Marketing, Speedway, and Pipeline Transportation segments. The company owns and operates seven refineries in the Gulf Coast and Midwest regions of the United States that refine crude oil and other feedstocks, and its distributes refined products through barges, terminals and trucks, as well as purchases ethanol and refined products for resale.

While acknowledging that the company’s margins may have compressed some, many on Wall Street also expect strong revenue contribution from the assets acquired from Hess. Last year the company converted almost all the Hess stations to the company’s Speedway brand.

Marathon reported lousy first-quarter 2016 earnings, owing to weak crack spreads and increased turnaround facility activity. The company posted earnings per share that fell well short of the consensus estimates. Revenues topped estimates, but they were much lower than in the same period a year ago.

Marathon shareholders are paid a 3.53% dividend. The RBC price target for the stock is $58. The Thomson/First Call consensus price target is $52.73, and shares closed trading most recently at $36.22.


Raytheon

This company has a diversified mix of business, posted solid first-quarter numbers and increased its forward outlook. Raytheon Corp. (NYSE: RTN) is an industry leader in defense, government electronics, space, information technology and technical services.

Raytheon is not only likely to benefit from domestic defense purchasing, but it has posted large contract sales to the Saudis over the past two years. Last year Raytheon purchased privately held cybersecurity company Blackbird Technologies for about $420 million. The acquisition will help expand its surveillance and cybersecurity services. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services.

Raytheon investors are paid a 2.31% dividend. The RBC price target for the stock is $148, and the consensus target is $141.76. The shares closed the day Wednesday at $126.72.